As the U.S. presidential election rapidly approaches, investors are naturally focused on how the coming election could impact the performance of both the overall stock market as well as their individual holdings.
Here are a few general trends to keep in mind as it relates to the performance of stocks before and after a presidential election:
- Speaking in general terms, according to research conducted by Fidelity Investments, since 1950 S. stocks have averaged returns of 9.1% in election years.[i] However, it’s important to note that U.S. stocks have historically risen over the long haul, so that 9.1% average election year gain is not out of line with the market’s overall performance over the last several decades.
- Market volatility does tend to increase in the months leading up to U.S. presidential elections, with October generally bringing the most volatile times. So investors should be cognizant of the potential for large swings in the market in the coming weeks and months.
- As for who wins the election, an analysis conducted by Morgan Stanley showed that – from 1928 to 2016 – when a Republican was elected to office, the average annual S&P 500 return for the year was 15.3 percent. And when a Democrat was elected, the average yearly return for the S&P 500 was 7.6 percent.[ii]
- Once the election has passed, the “presidential election cycle theory” suggests that U.S. stock markets tend to follow a predictable pattern which includes a dip in the first year following the election as the new president implements policies and reforms.
Keeping those trends – and others – in mind, what follows is a list of five election-year stocks that could offer significant upside potential in the months ahead.
As always, be sure to do your own due diligence before investing in any stock to make sure it’s right for your financial situation and that it is consistent with your acceptable level of risk.
- General Motors Company (NYSE: GM)
General Motors Company (NYSE: GM) is the largest automaker in the United States, with a market share of around 17%. The company operates through segments including GM North America, GM International, Cruise, and GM Financial, and markets under brands including Buick, Cadillac, Chevrolet, and GMC.
A win by the Republican ticket in November could lead to a renewed “America-first” agenda, which may benefit GM via tariffs on foreign auto manufacturers.
And a win by the Democrats could mean an even greater push for electric vehicle manufacturing, which is a key area of growth for GM. The company plans to launch 30 new electric vehicles by 2025 and has committed to investing $35 billion in EV and autonomous vehicle technology over the next five years.
GM appears to be a company that is uniquely positioned for a potential boost no matter who wins the White House in November.
Analysts appear bullish on the potential for General Motors Corporation, having established a consensus price target of $55.17. That represents a forecast upside of 26.7% from its current price of $43.81 per share.[iii]
- First Solar, Inc. (Nasdaq: FSLR)
First Solar, Inc., (Nasdaq: FSLR), is a solar technology company that provides photovoltaic (PV) solar energy solutions in the United States, France, Japan, Chile, and internationally.
The company manufactures and sells PV solar modules with a thin film semiconductor technology that provides a lower-carbon alternative to conventional crystalline silicon PV solar modules. It designs, manufactures, and sells cadmium telluride solar modules that converts sunlight into electricity.
The company’s residual business operations include project development activities, operations and maintenance services, and the sale of PV solar power systems to third-party customers. It serves developers and operators of systems, utilities, independent power producers, commercial and industrial companies, and other system owners.
The passage of President Biden’s Inflation Reduction Act of 2022 was a tremendous growth catalyst for green energy companies such as First Solar, Inc.
If Vice President Harris wins the election in November, that would certainly be good news for the growth potential of green stocks in the coming years. And that prospect could bring a rise in share price as well.
Currently analysts are optimistic about the potential for First Solar, Inc., as they have established a consensus price target of $275.36. That represents a forecast upside of 21.2% from its current price of $226.74 per share.[iv]
- Halliburton Company (NYSE: HAL)
Halliburton Company (NYSE: HAL) provides products and services to the energy industry worldwide.
Founded in 1919 and headquartered in Houston, Texas, the company operates in over 80 countries, with its primary business lines including drilling and evaluation, completion and production, hydraulic fracturing and other services. The company’s customers include major oil and gas companies and independent operators in the energy industry.
A Republican victory in November would no doubt be a boon for domestic oil and gas production, which in turn would be outstanding news for Halliburton shareholders.
The company’s stock performance has suffered a bit in recent months, but its financial picture remains strong. This could make the company an outstanding “buy-low” candidate with potential for significant upside in the event of a tailwind brought on by a Trump victory.
Analysts are in agreement that the company’s shares are a bargain, with 15 current “buy” ratings, one “hold” rating and zero “sell” ratings. The analysts’ consensus $45.35 price target represents a 46.4% upside from the current price of $31.02 per share.[v]
- Rivian Automotive, Inc. (Nasdaq: RIVN)
Rivian Automotive, Inc. (Nasdaq: RIVN) is an American automotive manufacturer that develops and builds category-defining electric vehicles and accessories.
The company creates innovative and technologically advanced products that are designed to excel at work and play with the goal of accelerating the global transition to zero-emission transportation and energy. Rivian vehicles are built in the United States and are sold directly to consumer and commercial customers.
A victory in November by Vice President Kamala Harris would likely lead to a continued – if not expanded – commitment to promoting domestic electric vehicle production.
And as one of the U.S. leaders in the EV market, Rivian appears well-positioned to benefit from increased support for U.S.-based manufacturing of electric vehicles.
The company’s R1S is already the bestselling EV in the U.S. with a price tag of over $70,000. Additionally, Rivian is targeting the lower-cost market with its new midsize R2, R3, and R3X vehicles, unveiled earlier this year. Rivian also has a huge customer in Amazon, which is looking to deploy 100,000 Rivian-manufactured electric-delivery vans to reduce carbon emissions.[vi]
Analysts are also bullish on the potential for Rivian Automotive, having established a consensus price target of $18.09. That represents a forecast upside of 36.9% from its current price of $13.28 per share.[vii]
- Marathon Digital Holdings, Inc. (Nasdaq: MARA)
Marathon Digital Holdings, Inc. (Nasdaq: MARA) operates as a digital asset technology company that mines digital assets with a focus on the bitcoin ecosystem in United States.
On the campaign trail, former President Trump has has stated that stands ready to embrace new technologies to help fuel America’s growth, including cryptocurrencies. Additionally, he has also stated that he supports the idea of a U.S. stockpile of mainline cryptocurrencies and that he wants all future bitcoin to be mined in the United States.
This embrace of crypto could mean great news for select crypto stocks in the event of a Trump victory.
Marathon Digital Holdings is undoubtedly one of the crypto stocks best positioned to benefit from a Trump victory. In fact, the company’s CEO, Fred Thiel, has stated that he believes his company is “the only large-scale miner who can…ensure that all the blocks mined are made in the USA.”[viii]
Analysts have established a consensus price target of $19.55 for shares of Marathon Digital Holdings. This represents a 28.7% upside over the current share price of $15.13.[ix]